Tyson plays down the impact of China’s ban on U.S. poultry

China, an important U.S. trade partner for the U.S. poultry industry, has once again shut off imports following the discovery of avian influenza in backyard poultry and wild birds in the Pacific Northwest.

This move surprised the U.S. poultry industry because the H5N8 virus detections uncovered in backyard hens in Oregon along with wild birds in Washington State and California last month did not involve commercial poultry farms.

“There’s absolutely no justification for China to take such a drastic action,” said Jim Sumner, president of the USA Poultry & Egg Export Council. “In fact, these isolated and remote incidents are hundreds if not thousands of miles away from major poultry and egg production areas. Most all of our other trading partners have taken some sort of regionalized approach and have limited their restrictions to the state or, in some cases, to the county. We would have expected China to do the same.” 

From January through November last year, U.S. exports to China – a key export market for U.S. chicken, turkey and duck products – reached nearly $272 million, according to the export council.

The nation’s largest chicken company, Tyson Foods Inc., does considerable exports with China and operates inside the country with a vertically integrated chicken business of its own.

In 2013, Tyson exported $368 million of chicken products to China, which was 16% of its international poultry sales. Tyson’s business inside China is not profitable, which has caused the company to stall plans for expansion until market demand in China improves, Tyson CEO Donnie Smith noted in the November earnings call.

Tyson’s export sales grew in 2014, but the operating margins for its internationally run chicken business were down 8.8% as plants ran at just 67% capacity. The meat giant recently sold off its Mexican and Brazilian chicken business to competitor Pilgrim’s Pride, which likely could have been used to fill some orders in China during this ban.

Tyson declined to estimate what this ban could cost, given there is no way to know how long it will last and there are plenty of other countries accepting U.S. poultry exports.

“Since Avian Influenza hasn’t been found in any commercial U.S. poultry flock, we’re disappointed about China banning poultry products. There may be some impact to our business, but we believe the volume will be absorbed by other global markets," said Tyson Foods spokesman Worth Sparkman.

U.S. industry insiders say China’s move to impose a nationwide ban in response to isolated incidents of avian flu goes against international guidelines established by the World Organization for Animal Health (OIE). 

The U.S. Department of Agriculture reports that the H5N8 virus was contained to the affected premises and has not been found in commercial poultry. State and federal officials have increased ongoing surveillance of commercial poultry and backyard flocks in the Pacific Northwest, the agency said.

Sumner adds that China’s restrictions are not only affecting U.S. poultry exporters they are also hindering it’s own domestic business because the U.S. is China’s main source of breeding stock which provides the eggs and chicks needed to maintain production.